Upload
others
View
2
Download
0
Embed Size (px)
Citation preview
Major Milestones and Trends inMajor Milestones and Trends inWashington’s Tax StructureWashington’s Tax Structure
1935-20011935-2001
Presented by Don Burrows
For the Washington State Tax Structure Committee
November 2001
1935 Revenue Act1935 Revenue Act
Complete change in state government’s taxsystem
First general use tax in the U. S.
Court rules sales and B&O taxes to be excisetaxes
Legislature given wide authority as to rates,exemptions, classifications, etc.
1935 Revenue Act1935 Revenue Act
New Taxes New Taxes ReimposedStill in Use Not in Use Today Prior TaxesRetail Sales Admissions (T) Business & OccupationCompensating (use) Stock Transfers (V) Public UtilityLiquor Radio (U) Inheritance (R)Cigarettes Fuel Oil (R)
Conveyance (R)Medicines & toiletries (V)Store License (V)Gift (R)Corporation Net Income (U)
(T = transferred, V = vetoed, U = unconstitutional, R = repealed)
Pre WW IIPre WW IIRaising Rates & Broadening BasesRaising Rates & Broadening Bases
1937 – Motor vehicles transferred to excise tax
1939 – Sales tax broadened (food and services topersonal property)
1941 - Sales tax extended to services to real property
1941 – Sales tax from 2% to 3%
WW II PeriodWW II Period
Expenditure growth limited by war
Surpluses accumulate during war
1944 -
• 40 mill limit written into Constitution
• Constitutional dedication of gas tax
Post WW IIPost WW II
1948 - Expenditures increase -- welfare initiative, baby boomers
1951 - General Fund deficit, excise taxes increased
1953 - Study shows property assessments low
1955 - Revaluation Act Unconstitutional school levy (Ryder Act)
The 1957 Tax Advisory CouncilThe 1957 Tax Advisory Council
Tied vote on recommending income tax
Recommended
• Sales tax rate increase
• Extend sales tax to services
• Rehabilitation of property tax
The 1957 Tax Advisory CouncilThe 1957 Tax Advisory Council
Why more revenue from property taxes?
Washington tax lowest of western states
Assessment levels 18%Constitution called for 50%
1959 Legislative Response1959 Legislative Response
• Sales Tax - 3.33% to 4.0%
• B&O - 40% surtax to 76%
• Liquor - 10% to 15%
• Cigarettes - 5 cents to 6 cents
• MVET - 1.5% to 2.0%
Property Tax Concerns - 1960sProperty Tax Concerns - 1960s
Special school levies increasing rapidly
Inflation and revaluation increase property taxes
The 50% assessment level threat
Property Tax - New Limits/reductionsProperty Tax - New Limits/reductions
1965 - Enacted property tax lid law
1966 - Passed retired person constitutional amendment
1970 - Approved current use constitutional amendmentLower values for timber, agricultureand open space
A New Tax Advisory Council – 1965A New Tax Advisory Council – 1965
Standoff in 1965 legislative session
• 25% versus 50% assessment level
•Governor appoints new tax council
1965 Tax Advisory Council Proposals1965 Tax Advisory Council Proposals
• Single rate income tax (individuals andcorporation)
• Constitutional property tax limit from 2.0% to1.25%
• Reduce sales tax rate and exempt food• Reduce B&O tax• Special school M&O levy relief• Shift state 2 mill property to locals
Changes in 1968 Report
• Lower property tax limit to 1%
• Food tax credit rather than outright exemption
• Eliminate B&O
• Allow different single rate income taxes forindividuals and corporations
• State fully fund basic education (special M&O leviesfor special programs only)
• Shift 10 mills from schools to other localgovernments
The Income Tax ProposalThe Income Tax ProposalHJR 42 (1969 ElectionHJR 42 (1969 Election)
1% property tax limit
Single rate income tax with referendum forgraduated rates in 1975
Measure failed by a vote of 2 to 1
City and County 0.5% Sales TaxCity and County 0.5% Sales TaxFirst Authorized in 1970First Authorized in 1970
Basic city/county tax has doubled
Many new local taxes authorized since 1970
SJR 1 - The 1% Property Tax LimitSJR 1 - The 1% Property Tax LimitMeasureMeasure
1969 - Court orders 50% assessment
1970 - Legislature cuts millage rate
1971 -
• Legislature passes the 106% limit law
• Voters approve the 1% property tax limit
1973 Legislature Submits Tax Reform1973 Legislature Submits Tax Reformto Votersto Voters
• Graduated individual rates not to exceed 8%• Corporate top rate of 12%• Full funding of schools• Special M&O school levies prohibited• Exemption of business inventories• A rate cap on state and local sales taxes of 5.3%• Exemption of food from sales tax• Eliminate B&O tax
HJR 37 Defeated 3 to 1HJR 37 Defeated 3 to 1
Possible ReasonsPossible Reasons
Taxpayers’ aversion to new/additional tax
Incentive of lower property tax limit not available as with HJR 42
Prohibition against special M&O school levies
Poorly financed campaign
Supreme Court Orders Full EducationSupreme Court Orders Full EducationFundingFunding
1976 - Court says paramount duty of state to support education
1977 - Full funding of “basic education” law passes
1977 - Phase in 10% limit on special M&O school levies
The Best of Tax TimesThe Best of Tax Times
1976 - Surplus, strong economy and reduced K-12 enrollments
Tax reductions and full funding of basic education• 1977 - sales tax off food by initiative
• 1981 - inheritance and gift taxes eliminated by initiative
The Worst of Tax Times: 1981-1983The Worst of Tax Times: 1981-1983
State’s worst economic downturn since theDepression
Budget cuts and tax increases abound
The Worst of Tax Times (The Worst of Tax Times (Cont’dCont’d))
1981 - Increase sales tax rate 4.5% to 5.
1982 - Double round of surcharges
Food subject to sales tax for 14 months
1983 - Sales tax increase from 5.4% to 6.5% in 36 counties
The 1993 Tax IncreasesThe 1993 Tax Increases
Last major tax increases during 1993 economicdownturn
B&O service category experienced very large increases
Rollbacks in most rates have occurred since that time
Recent Tax Policy TrendsRecent Tax Policy Trends
Most recent tax increases earmarked
Promote economic growth through taxincentives
Increasing use of initiatives and referendums
Initiatives and ReferendumsInitiatives and Referendums
• I-601 - the 1993 tax and expenditure limit
• Ref. 49 – transfers MVET funds to transportation
• I-695 – eliminates the MVET
• I-747 - limits property tax increases to 1%
• I–753 - increases the cigarette tax 60 cents
The Future of Taxation In Washington? The Future of Taxation In Washington?